Editorial: Hotel Incentives Offered as Enticement for
Development Need Further Answers

Messenger-Inquirer, Owensboro,
Ky.McClatchy-Tribune Regional News

Nov. 29, 2010--Whenever government starts handing out
incentives to
entice development, there will be those who scream that someone is
getting a sweetheart deal or that tax dollars are being wasted.

Incentives are controversial by nature, creating a divide
between those who think providing free land or tax breaks are a
necessary investment in the community's future, and those who don't
believe public dollars should be used to spur private development.

But Mayor Ron Payne stoked this fire with his comments last
week about the agreement on the proposed downtown hotel recently
reached by the city and The Malcolm Bryant Corp.

That agreement calls for the city to give Bryant nearly 2.1
acres on the northwest corner of West Second and St. Elizabeth streets
-- valued at $1,389,185 -- to be the site for a $20 million Hampton Inn
& Suites.

There's nothing really controversial about that, as it has
long been known that the city would provide the land for the hotel. But
the deal also includes a provision that if the hotel fails to reach 65
percent occupancy for three years during any five-year period in its
first decade, the city will reimburse Bryant an amount equal to the
city property tax paid by the hotel, which would be about $52,000
annually.

The money would come from occupational and tangible property
tax revenue generated by the hotel.

The obvious question is how did the city determine 65 percent
occupancy as the baseline for incentives? When asked this question by a
Messenger-Inquirer reporter, Payne said it was the number Bryant asked
for and that the city agreed to in negotiations.

Sorry, but that answer doesn't exactly inspire confidence that
city officials did everything possible to protect the interest of
taxpayers in the negotiation process. Don't we all wish we could just
go to City Hall, tell officials what we're willing to pay in taxes, and
have them accept whatever number we throw out?

Bryant and City Attorney Ed Ray were at least able to shed
some light on how the number was reached. Bryant said the national
occupancy rate for Hampton Inn and Suites ranges between 65 percent and
70 percent. And Ray said the city consulted with people knowledgeable
of the hotel industry and was told 65 percent is not unreasonable for
such an incentive.

But Payne's response is baffling. It shows either an arrogance
that people don't deserve a better answer as to how this number was
arrived at, or a lack of knowledge as to how it was reached.

It's hard to say which is worse.

There's another issue, however, that shouldn't be ignored. For
the longest time, city officials have said a big reason why such
incentives are needed is there weren't a lot of people interested in
investing in Owensboro's downtown without some sort of safety net.

The perceived lack of interest by developers -- or at least
developers who could make a larger hotel work -- is also the reason
we've been given for why the hotel will be 150 rooms, instead of the
225-room hotel the city originally sought.

All of this is likely true, and we're thankful that Bryant
stepped forward with a plan for reinvesting in his hometown. But how
many other hotel developers would have been at the table if they had
known up front the type of incentives that would be available?

Free land is one thing. But guaranteed 65 percent occupancy
rates and the right of first refusal to build a second downtown hotel
on city-owned land immediately surrounding the planned convention and
events center change the game all together.

Would these incentives have made enough difference to bring
more developers to the table? Would more developers bidding on the
project given the city a better negotiating position, thereby reducing
the need for such generous incentives? Was it a mistake not to spell
out all of the incentives that would be available prior to the request
for proposals being issued, not after a developer had already been
selected?

For residents to have faith that this truly is the best deal
the city could have reached to get a hotel built downtown, officials
need to be able to answer these questions.

And they deserve a better answer than just "this is what the
developer wanted, so it's what we gave him."

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